Government Gives Brazilian Companies a Break and Cuts Interest Rates

Factory in Brazil
Measures announced June 29 by the government of Brazil to stimulate the
economy will favor investment by companies, as well as sales of the
capital goods industry. A reduction of interest rates on loans by the
Brazilian Development Bank (BNDES) was announced.

The Long Term Interest Rate (TJLP), which provides a reference for loans by the BNDES to companies, will drop from 6.5% a year to 6%.

The machinery and equipment industry has also been highly benefited by the packaged announced. The Tax on Industrialized Products (IPI) will be lowered for a total of 70 items manufactured by the segment, among them wind energy generators, industrial freezers and industrial valves.

The measure will remain in effect until the end of the year. There will also be a reduction in the cost of financing for purchase of capital goods. The lines of credit will have a 5.5% decrease in interest rate, to be covered by the government.

Two credit guarantee funds will be established for the purchase of capital goods by medium and small companies. The two funds will be managed by the BNDES and the Bank of Brazil. They will receive 4 billion Brazilian reais (US$ 2 billion) from the Federal Government and will ensure up to 80% of operations. In some cases, according to information supplied by the chairman of the BNDES, Luciano Coutinho, the coverage may reach 100%.

The government has also extended the duration of the lowered IPI on various products, as a means of keeping the domestic market going and of helping Brazilian businesses perform well despite the international crisis. Automobiles, for example, will have three more months of tax exemption, and after that period, the rate will gradually return to normality.

Trucks will remain exempt from the IPI until late December, and the so-called white-line products will remain tax-free until late October. Motorcycles will be exempted from the PIS Cofins tax until September. Fiscal benefits were also created for building materials, wheat, flour and French rolls.

Anba

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